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Stocks trade mixed this morning

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Stocks rebounded from their earlier lows as the major market indexes now trade either side of unchanged. After a dip to 8,258, the Dow Industrials (INDU) 8,300-0.19% traded as high as 8,363, a 100 point reversal from their lows after the 10:00 AM EST release of housing numbers.

New homes sold in September reached a record 1.02 million, the Commerce Department reported Friday, a 0.4% gain from the previous month and well ahead of the 987,000 economists had forecasted.

But other signs, including weakness in the South and Midwest and a gain in the supply of new homes on the market, show the housing market has apparently cooled from earlier in the year. And since September, mortgage rates have inched up.

The supply of homes for sale at the end of the month rose 0.6 % to 332,000 - the most new homes on the market since August 1996 and a likely indicator that prices will soften at least modestly.

A months' supply of homes on the market stood at four in September, up from 3.9 in August. The supply did stand at 4.2 months in July.

This news has the Dow Jones Home Construction Index ($DJUSHB) 310.69 -2.09%.

DJ US Home Construction Index ($DJUSHB) - Daily Chart

With the seasonally strong summer season having come and gone, winter is approaching and may have some potential new home buyers waiting until next spring if looking for a new home. The $DJUSHB's recent rally attempt fell short of testing the starting to round out longer-term 200-day SMA, hinting that the home builders may be seeing a shift downward longer-term. A close back below "old" upward trend would be a negative and have the 288 level of 50% retracement in play near-term. Sector bears in specific names could use recent resistance at 332 as a stopping point as upside risk would then be assessed to the 200-day SMA at 340.

In a separate note, existing-home sales increased 1.9 % to a seasonally adjusted annual rate of 5.40 million units in September from an upwardly revised pace of 5.30 million units in August, the National Assoc. of Realtors, a trade group for realtors, said Friday. Last month's sales activity was 7.8% above the 5.01-million unit pace in September 2001. Economists had forecast September existing-home sales of 5.35 million units, so today's number was slightly better than expected.

Jeff Bailey

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